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Independent Fiduciary Appointed To Operate New York Health and Welfare Plan In Consent Order Obtained By Labor Department

Archived News Release — Caution: Information may be out of date.

New York, New York - The U.S. Department of Labor obtained on May 4 a partial consent order appointing an independent fiduciary to oversee the Huntington, New York-based health and welfare plan of Mutual Employees Benefit Trust (MEBT) and requiring all four plan trustees to resign their positions with the plan.

“This case represents a flagrant abuse of plan assets to enrich others to the detriment of workers and their families,” said Ann L. Combs, assistant secretary for pension and welfare benefits. “Our action replaces the trustees with an unbiased third party who will manage and operate the plan for the benefit of plan participants.”

The partial consent order appoints David Silverman as the court-appointed independent fiduciary to replace the trustees. The independent fiduciary has authority to oversee the operations of the plan, pay participant claims and to terminate the plan in an orderly manner, if appropriate. The order also bars the settling defendants from serving the MEBT plan unless expressly permitted by the independent fiduciary.

Under the terms of the order, defendants Leonard Slutsky, Clark Hower, Marketing Motivation Associates, Inc., Netscor, Inc., and VCT Financial Services, Inc. will not serve as fiduciaries or service providers to any plan governed by the Employee Retirement Income Security Act (ERISA) subject to resolution of the department’s suit. The trustees, Sharlene Slutsky and Mutual Association Administrators, Inc., also are barred from exercising control over the trust or serving as fiduciaries to any ERISA-covered plan, until this matter is resolved.

The department sued the trustees on November 15, 2001, for allegedly diverting more than $2.2 million in MEBT plan assets to benefit sham labor unions and corporations. Leonard Slutsky is a convicted felon who allegedly acted as a fiduciary to the MEBT plan. ERISA bars persons who are convicted on certain criminal charges from serving as fiduciaries to any plan governed by the federal pension law. Sharlene Slutsky is the owner and president of MEBT’s third party administrator. Hower is the owner and president of a sham “employer association” that allegedly received assets diverted from the MEBT plan.

Defendants signing the order include Leonard Slutsky, his wife Sharlene Slutsky, Hower, Mutual Association Administrators, Inc. (MAA), Marketing Motivation Associates, Inc., Netscor, Inc. (Netscor), VCT Financial Services, Inc., and trustees Leonard Mandelbaum, Tom Perez, Jack Neiman and Adena Samowitz. In addition, the suit named as defendants Financial Consultant Guild of America and union locals American Employees Industrial Guild Local 1, American Employees Industrial Guild Local 2, the New York Small Business Network, Inc. (NYSBN) and Susan Fisher.

MAA, which is owned by Sharlene Slutsky, provided third-party plan administration services to the plan. MEBT is a multiple employer welfare arrangement that provided group health and other welfare benefits to as many as 1,912 participants.  Since 1996 the defendants diverted more than $2.2 million in plan assets to the unions, NYSBN and Netscor in the form of sham union and association fees. The suit also alleges that Leonard Slutsky, who was previously convicted on criminal charges, was allowed to serve as a fiduciary to MEBT.

The partial consent order, entered in federal district court in Central Islip, New York, resulted from an investigation by the New York Regional Office of the Pension and Welfare Benefits Administration into alleged ERISA violations. Employers and workers can contact the regional office at 212.337.2462 or PWBA's Toll-Free Employee & Employer Hotline number: 1.866.275.7922, for help with any problems relating to private-sector pension and health plans.

(Chao v. Slutsky
Civil Action No. 01-7593(ADS)(TB))

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Archived News Release — Caution: Information may be out of date.

EBSA News Release: 
05/17/2002
Release Number: 
BOS 2002-111